Good Article about Ireland

By P O Neill in a Fistful of Euros:

Some stories heard in rural Ireland this summer. A farmer goes into an embattled tractor dealer and reaches an understanding on the purchase of an expensive tractor. The farmer then goes to his local bank manager to get financing to purchase the tractor; as agriculture is not doing too badly despite the recession, there is some hope. But the bank has an unexpected response: we can’t give you a loan to buy that tractor, but we can finance one very like it — that we recently reposessed. So banks are in the farm machinery business, at the expense of actual farm machinery businesses.

A recreational golf player reports that it’s a good time to play golf in Ireland. Some local courses that had gotten shabby and run-down are finally having some needed working capital put into them, and now they look good. How did this happen? The banks took them over and will do anything to attract a bit of business, even if it means putting in some additional money. Then there’s the miseries of the hotel business, which have featured in the national newspapers. Apparently the hotels being run by banks have gotten hold of the forthcoming wedding parties at neighbouring hotels, and are calling the couples directly with offers of a better deal — enough of a better deal to cover the lost deposit at their original booking. And finally, one of the big fish: the well-known department store Arnott’s, now being run by Ulster Bank (RBS subsidiary) and Anglo Irish Bank (of which more in a moment).
The big picture is that the Irish debt crisis has put the banks into lines of business that they never planned to be in. With the result that significant sectors of the Irish domestic economy are now being run by them. But there is a strange flip side to this situation. There is exactly one sector of the economy that the government has declared off-limits from the process of debt distress, restructuring, and external management — the banking sector. And so it is that unlimited public funds are available to keep solvent what would otherwise be insolvent banks, the €24 billion or so directed to Anglo Irish Bank being the epitome of this problem.

And sometimes we wonder if the external prognosticators looking at Ireland have fully grasped the role of the banks in the Irish economic shambles…